Global sourcing for global markets.

• Author: Sinnett, William M.
• Position: Financial Executives Research Foundation's survey

CALL IT WHAT YOU MAY: OUTSOURCING, OFFSHORING OR THE NEWEST DESCRIPTIVE: GLOBAL SOURCING. IT'S RAISING ISSUES--AND OFTEN BLOOD PRESSURE--ESPECIALLY AS IT RELATES TO DOMESTIC JOBS, INTERNAL CONTROL AND NOW NATIONAL SECURITY. FINANCIAL EXECUTIVES RESEARCH FOUNDATION (FERF) SEEKS REASONS WHY THE STILL-EVOLVING PRACTICES HAVE BECOME THE WAY GLOBAL ORGANIZATIONS NOW DEFINE THEIR BUSINESSES.

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When The Washington Post reported on February 11 that Dubai Ports World (DP World) was poised to "take over significant operations" at six American ports, as part of a corporate sale, the national news networks churned into action--causing a political maelstrom and setting a new debate.

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DP World--a company based in the United Arab Emirates--had purchased London-based Peninsular and Oriental Steam Navigation Co., the current operator of U.S. ports in New York, New Jersey, Philadelphia, Baltimore, Miami and New Orleans. DP World would effectively handle shipping arrivals, departures, unloading at the docks and many security-related functions (which it subsequently denied, saying it would not handle any security functions).

DP World said the deal had been approved by the Committee on Foreign Investment in the U.S., a 12-member board that includes White House officials and Cabinet members from the Departments of Treasury, Defense, Justice, Commerce, State and Homeland Security. Within days, Senate and House leaders called on President George Bush to delay the takeover, threatening to introduce legislation if he did not act quickly.

Bush then told reporters, "I want those who are questioning it to step up and explain why all of a sudden a Middle Eastern company is held to a different standard than a [British] company."

The President's statement gets to the heart of global sourcing. What was once a debate about jobs has--in this instance--now become a debate about national security. Companies subject to Sarbanes-Oxley compliance also have to be concerned about internal control, both within their own company, as well as within those companies they align or partner with, whether the company is located in the U.S. or offshore. Yet, in spite of added layers of scrutiny, the pressures of competition will force companies to look for cost efficiencies wherever they can find them.

Last December, Unilever N.V. announced a seven-year contract to outsource significant parts of its financial transactional services to IBM Business Consulting Services (IBM). The agreement covers more than 20 European countries, and, according to Unilever's press release, "aims to streamline the organization in order to increase competitiveness in the marketplace and step up growth." The services will be delivered from IBM centers in Portugal, Poland and India, and Unilever expects annual...